NPV Rule - ANS Accept projects with NPV>0
Fisher Separation Theorem - ANS Investment decision DOES NOT depend on preferences of individual
investors for current versus future income
IRR - ANS The discount rate that makes the NPV zero
IRR Rule - ANS Accep...
Fisher Separation Theorem - ANS Investment decision DOES NOT depend on preferences
of individual
investors for current versus future income
IRR - ANS The discount rate that makes the NPV zero
IRR Rule - ANS Accept projects with IRR>r (discount rate)
IRR Pitfalls - ANS Two opposite projects
No IRR or multiple IRRs
Wrong decision when choosing among mutually exclusive projects
Payback Rule - ANS Accept a project if its payback period is less than some specified
cutoff period
Payback Period - ANS # of years to recover initial investment
Payback Rule Pitfalls - ANS It ignores all cash flows after the cutoff date.
No time value of money is considered.
Enterprise Value - ANS The market value of the firm's operating assets
EBT - ANS Earnings before tax or income before tax
EBIT - ANS Earnings Before Interest and Tax
Bonds - ANS Liability
Stocks - ANS Equity
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller DocLaura. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.79. You're not tied to anything after your purchase.